Gold Manipulation: It’s Much Bigger Than You Think

From Michael Edwards, editor of the Activist Post: All of your work is outstanding, but this one goes beyond – wow, thank you very much for your analysis. This is one of those stories that can really open people’s minds on a broad scale that there truly are things called “conspiracies.” Maybe if people can face the obvious, they will dig even deeper.

The gold price manipulation scheme will go down as the biggest financial market scandal in US history for numerous reasons. They include the destruction of the free market system in the United States. The manipulation of the gold and silver prices eventually led to the manipulation of US interest rates via the Fed, the stock market via the Plunge Protection Team, and to the currency markets. – Bill Murphy, GATA.org

The gold manipulation scheme has taken on historic proportions. It’s been going on for several decades – witness the London gold pools of the 1960’s which were implemented to prevent the price of gold from taking off because the U.S. was running out of gold with which to back the Treasury debt it had issued to foreign creditors who were redeeming their Treasury notes for gold per the Bretton Woods Agreement.

Ultimately this scheme failed when Charles de Gaulle famously began redeeming France’s Treasuries for gold because he had calculated that the U.S. had issued significantly more Treasuries than it had gold to back those Treasuries. France pulled out of the London gold pool operation and a couple years later Nixon was forced close the gold window or, rather, end the convertibility of foreign-owned Treasuries into gold.

Frank Veneroso, who wrote the brilliant “Gold Book” in 1998, told Sprott’s John Embry and I many years ago that the gold price suppression scheme was “much bigger than you think.” Frank found out the US Government was taping his phone calls and ever since has shut up about what GATA has to say. Frank was the one who exposed the gold leasing scheme, which is how The Gold Cartel did their thing so many years ago. It is how GATA knows the central banks have well less than half the gold they say they have in their vaults. Frank got his information from a Bank of England source who has since died. – Bill Murphy

Each new financial crisis (emerging market debt, Long Term Capital, tech bubble, housing/credit bubble, etc) was met with successively larger amounts of money printing and credit creation. Print money to keep the banks and the markets from collapsing and create more credit to keep the giant Ponzi scheme going. Once the gold bull market got underway in late 2000/early 2001, in order support the monetary intervention required to keep the U.S. systemic “shell game” going, the manipulation of the gold markets began to intensify. It also started to become more obvious in nature to those where researching, trading and investing in the precious metals sector. GATA was and is instrumental in exposing and reporting the facts about the manipulation of the gold market.

At the end of 2000, the Treasury had $5.6 trillion in debt outstanding. The current amount is $18.15 trillion but there is a debt issuance ceiling in force now for which the Obama Government is circumventing by raiding Federal pension funds, the Social Security Trust, issuing IOU’s and other cash “reservoirs” that will soon run out. The debt ceiling will have to be lifted again, like to $20 trillion. That’s nearly a 400% increase in just Treasury debt since 2000. At the end of 2000, the Treasury debt to GDP ratio was 54%. Today it is 102.5% and this does not include the Treasury’s Fannie Mae and Freddie Mac guarantees. In other words, the amount of Government debt has grown at twice the nominal rate of the U.S. economy in the same time period. Note: the “wealth” produced by the U.S. is part of the theoretical backing of the dollar.

This is just Government on-balance-sheet debt. Total Government contingent liabilities, i.e. on-balance-sheet plus off-balance-sheet, is now estimated by several different sources to be at least $200 trillion. This would include pension, Social Security, and several other Government entitlement programs. Recently it was estimated that State pension funds are now underfunded by at least $2 trillion. Student loan debt is now well over $1 trillion, of which 30%-40% in arrears or in outright/technical default, Most private pension funds are at least underfunded by 50%.

An “underfunded” liability is a socially correct term for “debt.” When the stock and credit markets re-collapse, the underfunded status of most if not all pensions will likely approach more like 90%. Some pensions will be wiped out.

Then there’s the derivatives…

The point here is that the fundamentals underpinning the precious metals market have strengthened cumulatively since the gold bull market began. There has not been one point in time in the last 15 years, in fact, when these fundamentals have weakened. What has changed is the degree of intervention engaged in by the Central Banks and U.S. Government as a means of preventing the price of gold from rising and signalling to the world that the U.S. political and economic system – the system which issues the world’s reserve currency – is increasingly corrupt, criminal and entirely fraudulent.

Yes, China has its issues as well but it has two things that the U.S. does not: $3.4 trillion in foreign currency reserves backed by a big trade surplus and a massive amount of gold. On the other hand, the U.S. foreign reserves are roughly $39 billion and it runs a $40 billion/month trade deficit. It is highly unlikely that the U.S. Government possesses legal title to little if any gold.

In my opinion, the ability of the U.S. in conjunction with its European vassals and the BIS to keep the U.S. dollar fiat money system in motion is largely dependent on the ability to keep the price of gold suppressed. In 2011, when silver threatened to take out $50 and gold was headed in the $2000’s, the U.S. elitists were staring into the abyss. That’s when the gold market intervention took on a whole new dimension. This is best visualized with this graphic:

The dislocation in the correlation between the price of gold and the size of the Fed balance sheet shown in the graph above is further supported by the manipulation activity reflected in these two graphs (inset chart on the right graph sourced from Zerohedge, with my edits) – click to enlarge image:

The graph on the left shows the massive paper ambush on the gold futures market on Sunday evening July 19. An enormous amount of paper gold contracts were dumped into the Comex’s globex electronic trading system during one of the slowest trading periods at any point in time during the trading week. A bona fide seller trying to sell a big position at the best possible execution prices would never have dumped a position like this. The only explanation is that someone wanted to drive the price the price of gold lower and make a point of doing so. This particular occurrence in the gold market has been a recurring event over the life of the gold bull market. However, the frequency of the above trading pattern has significantly increased since 2011.

The graph on the right is the daily, year-to-date graph of the price of gold. As you can see, despite the continuous strengthening of the underlying fundamentals supporting the price of gold, including the heightened risk imposed on the global financial system by the probable financial collapse of Greece, the price of gold trended lower during Q1 2015. The inset graphic, however, shows the big spike in gold OTC derivatives issued and held by the big banks, JP Morgan being the largest issuer of OTC gold derivatives. There is a definitive correlation between the big spike in gold OTC derivatives and the downward pressure on the price of gold.

This graph on the right, prepared by the TFMetalsReport, shows the record level of the ratio of paper gold to physical gold on the Comex – 117x. You can see the ratio exploded and went vertical starting mid-2013, which is right around the time Bernanke delivered his infamous “QE taper speech.” This graph unequivocally reflects the sense of desperation by the Fed and the Treasury in its efforts to push the price of gold lower using the extremely fraudulent paper gold market.

Finally, since mid-December, when it seems some sort of derivatives bomb exploded – LINK – the anti-gold propaganda from the media has significantly intensified. This especially true since the July 19 ambush. It’s not just anti-gold propaganda, however, it’s a grotesque preponderance of insidious misinformation and disinformation. The blatant manipulation of the gold market in conjunction with the rabid dissemination of anti-gold rhetoric from both the financial press and Wall Street reeks of desperation – desperation to keep a lid on the one market signal that would undermine the elitists’ perpetuation of the U.S. dollar-based systemic Ponzi scheme which enables them to loot and confiscate middle class wealth (“middle class” being defined as anyone not wealthy enough to buy their own politician or not in the privileged position to benefit from the wealth confiscation schemes).

The Shadow of Truth will be releasing a podcast in two-parts of a two hour conversation with Jim Willie sometime tomorrow. In a portion of the podcast, Jim Willie lays out the elaborate scheme being used to keep interest rates low and to push the dollar higher in one last desperate attempt to maintain the reserve status of the U.S. dollar and global hegemony of the United States, both of which are being systematically dismantled. Keeping a lid on the price of gold is the nexus of the blueprint for implementing the extreme market intervention by the Federal Reserve and the Treasury’s Working Group on Financial markets.

When the intervention in the gold market fails, which it inevitably will as have all other market interventions in history, it will have the systemic affect of delivering a massive blow from a 2 x 4 on the back of the heads of the unsuspecting public in this country. In other words, be prepared for life to become very uncomfortable in every respect. My personal view is that will be the case even for those of us who have taken steps to prepare for this inevitability.

25 thoughts on “Gold Manipulation: It’s Much Bigger Than You Think”

Gotta love it when a plan comes together. The closing of the gold window and the severing of the gold peg actually set the trade value of bullion free so that it might be re-monetized in the future with fully scalable market driven liquidity , something gold currency had not had when the price was pegged.

So if the Paper Gold market trades aprox. 110 times the amount of physical Gold per year … what if some smart people were able to re-engineer the paper Gold price discovery process so that only a much lower amount of paper Gold was allowed to trade against real physical Gold; ie; around a maximum of only 5 to 10 times paper Gold to physical Gold per year … that’d be equal to a massive reduction in the Gold supply.

I guess if Sprott and Rule were the geniuses that some say they are, they would’ve figured out a way to reduce the supply of paper Gold significantly by now.

Also… I don’t see massive chaos in the US just because there’s a high Gold price …. in fact, mining states like Nevada, Idaho, Montana, etc, would see massive economic booms….. just let the price trade on real supply/demand fundamentals, not a phony paper inventory that is 100plus times inflated.

You probably won’t see massive chaos because the gold prices is high.
The thing is, once the gold price is high, it will likely mean that lots of other things are high too because the confidence in the currency has been lost. When your portfolio buys 3 eggs, that’s when you see chaos.

It may help to think in terms of total liquidity that’s available for circulation. That does not have to be completely thought of as debt-based fiat, however. Bullion has a currency application too, more so now than ever because liquidity (economic coverage) is not limited to available mass on hand, only, but trade value too.

Bullion’s liquidity as a currency is the product of (weight x trade value/unit weight),
which translates to (weight x USD/oz)

When the market is willing to “supplement” existing liquidity with gold and silver (or their FULLY backed derivatives) , total liquidity is enhanced. As such debt based liquidity can be paid back to lenders and retired.

Gold actually saves the fiat currency paradigm when applied in this manner. The relationship becomes symbiotic rather than polarized. Seeing it that way can be a struggle as it does take one through a full paradigm shift in thinking. Think of it as a yin-yang of liquidity by the process of market osmosis.

I just try and keep it simple … one of my main views on Gold is as follows; It’s one of the best insurance policies for wealth preservation because of it’s lack of counter-party risk…….. I remember very clearly all those people who held paper instruments during 2008 to 2009 recession that essentially held paper products that had virtually no-bid at the time.

Yep Dave, I think you’ve got it right. It will blow and it will be a shock to all. Once it goes, all the underpinnings will be yanked away. How could it happen otherwise? Everything is too far gone. The only thing left will be severely discounted paper that represents some ownership in tangibles. Good luck with exchanging that for food.

I worry about a future demonization of gold and the people who hold it, but I’m sure it will eventually pass. Only when the reset has legs will gold come out of hiding. It will be welcome then. Until such time, leave it at the bottom of the lake. Better to keep a little silver around to exchange for meat from the hunters, fish from the fishermen, vegetables from the farmers and gas from the gasman. I will do my part in getting silver back into circulation 🙂

Dave you are doing INCREDIBLE work. Your tireless efforts to expose and inform are much, much appreciated. Really excited to read here that you will have Jim Willie on SoT this week! As a subscriber there, I have thought for YEARS that he uncovers the core players, tactics and reasons……All that are far beyond the comprehension of the masses – one of the reasons TPTB utilize them to their advantage.

It is a messy, dangerous and tricky world out there right now, thank you for pointing the spotlight on the dark players. In the end truth, integrity, nature and patriotism will win out. Let’s hope so……

dave, pcr just said, on an interview on usa watchdog, that he used to think that the financial system would fall apart because the US Gov/Fed/Treasury couldn’t possibly hold it together. however, now he doesn’t think that. he thinks they, along w/EU/BOJ can keep printing money to cover over the gov. ponzi schemes. he thinks the only way for financial system to unravel is for non-delivery of gold/silver. I have been thinking that way for the last couple of months as well. what is your take on his take on the financial situation? thanks, dave

Tony … I think you mean gold bugs are holding onto “shiny paper”, The metal supply is dwindling, which may not mean much to some but when the notion that gold is a form of currency hits home, you’ll really understand where the fundamental demand is coming from …. especially since we are in a market of declining liquidity. That’s what gold can “supplement” and support, declining liquidity. It’s a currency.

The perpetual manipulation may well be the “pain approach” (also known as “the stick” to push the market toward gold and gold based liquidity ( a one-two punch) in view of the fact that bullion CANNOT be monetaized , top-down from, the apex of political or banking power, not unless you want a massive fiat currency & debt crash. The catula addition of asset based liquidity must come from the market.

The legacy system has to be considered in the shift toward assets as a contributing factor to a healthy yin-yang. We end up with a real-time hybrid.

Printing money is just a way to steal wealth from the savings of society’s producers. There isn’t much left there to be stolen and at some point there will be not enough left to steal to keep the ponzi going so there is a limit in that regard as well.

Technically speaking, we already have anecdotal evidence that non-delivery of gold and silver has happened, so assuming these reports are true…it’s obvious that non-delivery alone isn’t sufficient. Perhaps it’s just a matter of time before the word spreads out about the paper-fraud, or maybe a question of scale, but I think it’ll be more about when the public’s perception changes. So far, I see no evidence that leads me to think that most people (particularly in the West) are mentally ready to accept an entirely different unit-of-account…one which works on completely different rules than they’re used to from fiat systems. Fiat works on rising prices; the PMs work on lower prices. Fiats are printed; the PMs are mined. Fiats are officially recognized; PMs are not (constitutionally speaking, it’s meaningless anyway if it isn’t enforced). Etc. We’re talking about undoing over 40 years of false-education in money…and that will not simply happen overnight. We all know that the masses are in for a rude awakening, but how long before they graduate from the School of Hard Knocks? Weeks? Months? Years? We shouldn’t underestimate how dumb people can be, even in the face of rampant fraud.

Case-in-point, there was a recent article today from Zerohedge describing the return of bartering in Greece. So far, I’m having trouble finding evidence of the metals being regularly used. Am I the only one who sees this?

Anyway, keep up the good work, Dave. We desperately need to get out of La-la land.

sorry to post again on this thread Dave, I don’t mean to monopolize things or step on your toes.
But, as an equity analyst, trying to go through the learning curve on some of this sort of stuff has really been quite challenging on an intellectual/professional level. Basically, I will probably end up getting out of the business, because so much of what has happened has really destroyed the foundation of finance and markets. With the sort of intervention that has gone on, especially the stuff like this that goes on behind the scenes, an investor really has no hope of knowing that they’re not going to get screwed, so my best bet is to get out of the game.
I’m wondering if you’ve encountered other people in the industry who feel the same?

All Gold Miners need to stop selling to New York & London agents …. all Gold production from public Gold mining companies should only be sold directly to the Chinese physical exchanges – and provide proof (certify) that all their Gold mining inventory is being sold to “paper-free” exchanges only.

Excellent summary about what is going in in the financial markets,particularly in Gold and Silver. Such kind of articles help me as a precious metals holder to stay the course. There is no escape from the coming financial calamity, the only question is “when” will it happen. I hope it will occur soon as I as a common investor want to return to a kind of normal investing. Which under the circumstances of the current huge bubbles is hardly possible. These bubbles are an extreme threat to any retirement savings.

Martin … If the market responds well, we may see an unfolding rather than a calamity. It all depends on how individuals see bullion, as to whether it should be held or hoarded or whether it should circulate as a market currency now that the trade value is free to float.

If all this proof of manipulation by and or sanctioned by the government does the investing public have the right to sue them for losses?
Where is the public advocacy to protect us from this criminal activity?

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